Connect with us

Editorial

IMF prescription

Published

on

Friday 4th March, 2022

The government is coming under increasing pressure to ask the International Monetary Fund (IMF) for assistance. It is wary of doing so owing to the constricting conditions that IMF help usually comes with. It does not want to mend its ways, and is behaving like a dipsomaniac afflicted with cirrhosis refusing to receive medical treatment for fear of being asked to stop drinking. Not that the IMF has a magic potion that can cure all economic ills of this country, but the government has run out of options.

The IMF has already spoken, according to media reports. Its Executive Board has, in a very diplomatically-worded statement, which is a textbook example of euphemism, told the Sri Lankan government what needs to be done to save the country’s economy. Reading between the lines, one sees that the IMF has given the lie to the government’s claim that the current economic crisis is due to the Covid-19 pandemic. The IMF says inadequate external buffers and high risks to public debt sustainability had rendered Sri Lanka vulnerable before the onset of the pandemic; ‘large tax cuts’ in late 2019, worsened the situation. It has observed: “… annual fiscal deficits exceeded 10 percent of GDP in 2020 and 2021, due to the pre-pandemic tax cuts, weak revenue performance in the wake of the pandemic, and expenditure measures to combat the pandemic.”

The IMF’s contention runs counter to the Opposition’s claim that the deterioration of the economy began after the 2019 regime change; it says the Easter Sunday terrorist attacks in 2019 exacerbated the situation, the implication being that the economy had not been in good shape even before that tragedy.

The sting is said to be in the tail. The IMF has, in the final paragraph of its statement, told the Sri Lankan government what the latter obviously does not want to hear; it has called for renewed efforts on ‘growth-enhancing structural reforms, which Sri Lankans are not well disposed to traditionally.

Sri Lankans consider structural reforms as a cure worse than the disease because of their experience with such programmes previously. The IMF directors have also called for measures to improve the business and investment climate in Sri Lanka; this may be read as a call for action to improve Sri Lanka’s ease of doing business rankings to attract foreign investors. This, however, is a tall order, given the sheer number of politicians and bureaucrats seeking to have their palms greased by foreign investors.

The SLPP abhors structural reforms due to their political fallout. It is their short-term impact that usually dominate political debate, and the long-term gains resulting from them, if at all, tend to be dismissed as uncertain forecasts. What Sri Lanka has undergone in the name of structural reforms has strengthened the position of the opponents thereof. They have witnessed disastrous divestiture programmes which caused vital state assets to go for a song. Structural reforms are a worrisome proposition for the government, which is already scared of facing elections; it has unashamedly put off the local government polls, which were to be held this month.

Economists inform us that political parties with educated, urban, middle class supporters who are not dependent on social welfare as such are not averse to structural reforms unlike the political organisations that are dependent on not-so-educated people who are in the so-called protected segments of the economy and dependent on benefits. This may explain why the SLPP did not want to seek IMF help.

The IMF has basically asked the Sri Lankan government very diplomatically to accept structural reforms, allow the free float of the rupee while gradually unwinding capital flow management measures as conditions permit, curtail waste, do away with tax concessions, increase taxes and energy prices, remove impediments to business and investment, cautiously tread on the Colombo Port City project, make a commitment to good governance and, above all, fight corruption. In other words, the IMF has spelt out what it expects Sri Lanka to do in case the latter officially seeking the former’s assistance.



Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Editorial

Govt. playing with fire

Published

on

Thursday 26th May, 2022

The government seems determined to perpetuate people’s suffering. It claims that adequate fuel stocks are available in the country, but pumps at most filling stations have run dry, and long lines of vehicles are seen everywhere. When the fuel supply was restricted, recently, despite the unloading of two or three oil shipments in quick succession, it became obvious that the government was planning to jack up petroleum prices. What was feared came to pass; oil prices increased. But the fuel shortage remains.

What prevents the Ceylon Petroleum Corporation from maintaining an uninterrupted fuel supply if it has enough stocks? Is it starving the market again with a view to effecting another price hike? The only thing it does promptly is to close the filling stations where clashes occur; this measure only aggravates the suffering of the peaceful people. Why can’t the police prevent such incidents at petrol stations, where they have a significant presence?

More than 40 filling stations have been closed countrywide, owing to clashes, according to media reports. It is only natural that tempers flare when people languishing in queues for long hours have to return home without fuel. Most people spend more than 12 hours in queues to obtain petrol and diesel. How would Minister of Power and Energy Kanchana Wijesekera, who has filling stations closed at the drop of a hat, feel if he happened to queue up for fuel and return empty-handed after hours of waiting?

Minister Wijesekera talks nineteen to the dozen in an accusing tone that suggests that he thinks the people have bankrupted the country and got their comeuppance. Let him be reminded that he is part of a failed government, whose leaders have ruined the country by mismanaging its economy and helping themselves to public funds; he is also responsible for the current mess. He should be considerate towards the people, and take action to ensure that fuel is distributed efficiently, instead of lecturing to them. He and his bosses ought to realise that they are playing with fire. They know what it is like when public anger spills over on to the streets, don’t they?

Fathers of crisis

Parliament is not without some good men and women who take their legislative duties and functions seriously and do their utmost to safeguard the interests of the hapless public. The Chairman and some members of the COPE (Committee on Public Enterprises) are among them. They have exposed various rackets in the public sector and censured errant state officials. They deserve public plaudits.

COPE Chairman Prof. Charitha Herath has called for a PSC (Parliamentary Select Committee) to find out who is responsible for ruining the economy and bankrupting the country. There is no need for an investigation to identify those who have reduced the country to penury.

The present economic crisis is not of recent origin, but it is the current regime that worsened it. The blame for the current mess should be apportioned to President Gotabaya Rajapaksa, former Prime Minister Mahinda Rajapaksa, who held the finance portfolio, and former Finance Minister Basil Rajapaksa. They did not heed expert advice, and ran the country like a petti kade in Medamulana. It has now been revealed that the Central Bank economists warned of an economic crisis well in advance, and called for action to avert it, but the government chose to ignore their warning.

A PSC probe, if conducted impartially, will help officially establish who is responsible for the economic meltdown. It must also be found out how US dollars disappeared from the country so fast, and whether there is any truth in the allegation that large amounts of foreign currency were smuggled out systematically during the past two years or so.

People have no faith in PSC probes thanks to the one into the Treasury bond scams, under the yahapalana government. The ruling party members of the PSC that investigated the bond racket behaved like a bunch of ruffians, insulting and intimidating the Central Bank (CB) officials, who testified against the then CB Governor Arjuna Mahendran. They stooped so low as to spoil the final COPE report with a slew of footnotes, and the Central Bank officials were prevented from countering their flawed arguments.

If a PSC is to be set up to investigate the economic crisis, the right persons will have to be appointed as its members, the majority of whom should come from the Opposition, if it is not to end up being another Treasury bond probe committee.

Continue Reading

Editorial

Failures as pillars

Published

on

Wednesday 25th May, 2022

Failures are the pillars of the incumbent government. Most of the newly-reappointed ministers have earned notoriety for incompetence and dishonesty. With them as Cabinet members, does the country need any enemies? The resignation of Prime Minister Mahinda Rajapaksa was expected to pave the way for the formation of a multi-party, interim government. But nothing of the sort has happened, and failed politicians are going places, again. Worse, the most important Cabinet post remains vacant; the Finance Minister has not yet been appointed although the economy is in a tailspin—so much for the government’s sense of priority and urgency! The Cabinet is like a third-rate ‘mega’ soap opera that drags on without the title character.

When one says the members of the new Cabinet are incompetent, one does not mean that there are other MPs—in the government or the Opposition—who are equal to the task of steering the country out of the present crisis under their own steam. The holier-than-thou members on both sides of the aisle have failed, albeit to varying degrees, and contributed to the current mess. The less said about the government MPs, the better, and the only thing the Opposition worthies are adept at is backseat driving; they claim to know the way, but cannot drive when they are provided with an opportunity. If so, why are these politicians being urged to sink their differences and form a national unity government?

The best contribution the members of Parliament could make to crisis management is to behave. That way they could help restore political and social order, which is a prerequisite for economic recovery. As long as they are at one another’s jugular, political stability will elude this country, making it impossible to put the economy back on an even keel. The International Monetary Fund, upon which the country is dependent for a bailout package, has expressed serious concern about socio-political upheavals here.

If the political parties co-operate in Parliament for the sake of the people, who are undergoing immense suffering, there will be political stability in the country at large. On 09 May, and the following day, we saw what they were really capable of. Supporters of both the government and the Opposition were involved in the spate of violence that rocked the country. Hence the need for their leaders to cooperate in Parliament, without fanning flames of violence. It is imperative that the government refrain from engineering crossovers from the Opposition, and make a serious effort to secure the support of its political opponents.

It’s fuel pricing formula, stupid!

The present-day rulers used to rake Finance Minister Mangala Samaraweera over the coals whenever fuel prices were increased under the yahapalana government. The then Opposition Leader Mahinda Rajapaksa even cycled to Parliament when petrol and diesel prices slightly increased. Today, fuel prices have gone into the stratosphere.

The SLPP grandees who made a song and dance about Mangala’s fuel pricing formula tell us that they have adopted the same method to determine fuel prices. They should apologise to Mangala posthumously.

The government says the public will gain from the fuel pricing formula in case of the appreciation of the rupee. It is going to be a long wait!

The Cabinet will revise fuel prices on a monthly basis, according to media reports. One shudders to think what will happen in case of monthly price revisions. Fuel prices will continue to soar, and driving/riding might be a luxury only the super rich can enjoy. The ‘babies’ of the ruling family might be able to turn Colombo into an F1 street circuit without any resistance from the public.

Continue Reading

Editorial

Government boost for GotaGoHome – Phase II

Published

on

Tuesday 24th May, 2022

The first phase of the campaign for ousting President Gotabaya Rajapaksa is over. It has only caused the resignation of Prime Minister Mahinda Rajapaksa, and the appointment of UNP leader Ranil Wickremesinghe as his successor. The President continues to hold office. All the problems that drove the public to stage street protests remain unsolved; in fact, they have worsened, but there has been a let-up in the protest campaign. One sees only unorganised, sporadic protests in some parts of the country.

The Galle Face protest, which started off as an apolitical struggle to dislodge the government and engineer a systemic change, has lost steam, but the forces that propelled it remain active. It was obvious from the very beginning that the core of the Galle Face aragalaya was political, and the fact that the JVP, and the Frontline Socialist Party have been behind the protest is now public knowledge. If ex-UNP MP Prof. Ashu Marasinghe’s admission, in a brief interview with this newspaper, that he had been involved in the Galle Face protest from the beginning is anything to go by, then the UNP, too, has had a hand in it. Does this explain why those who went all out to see the back of PM Rajapaksa float like bees and sting like butterflies, as it were, when they take on PM Wickremesinghe, who has been the main beneficiary of the aragalaya?

On 09 May, an SLPP goon attack on a group of anti-government protesters triggered an explosive release of the pressure build-up in the polity. The spate of violence that ensued ran its course, leaving little pressure for the anti-government forces to tap. The protest campaign against the President is now without much political traction, as a result; it needs a turbo boost, which will come only from another massive pressure build-up, for its Phase II to get underway. Pressure of such a magnitude could result from power cuts, the scarcity of essentials, etc.

All essential commodities are in short supply, but their shortage is not as severe as that of fossil fuels. Rains have lessened the country’s dependence on thermal power generation, albeit temporarily, and power outages are not as bad as they used to be. Cooking gas is also being made available, and it will lower the demand for kerosene. The food shortage is still not so severe as to trigger mass protests.

Pressure needed for the launch of the GotaGoHome protest – Phase II will result from the non-availability of diesel and petrol. The number of vehicles waiting in queues for petrol and diesel is increasing although the Ceylon Petroleum Corporation, and Minister of Power and Energy Kanchana Wijesekera insist that there are enough fuel stocks. Filling stations remain closed, most of the time, and not even the ones required to function round the clock are open at night, and, therefore, motorists and motorcyclists have to wait in queues overnight, undergoing tremendous suffering. People struggling to obtain fuel are so resentful that their tempers flare at the drop of a hat and fights break out frequently. The government has, in its wisdom, chosen to close the petrol stations where incidents of violence occur. Thus, it further aggravates the fuel problem and makes the people even more incensed. Public anger can be tapped to fuel the Phase II of the protest campaign against the President. The day may not be far off when people take to the streets in their millions, calling for the resignation of the President, again.

Strangely, no one in the government seems to care to sort out the fuel problem although enough diesel and petrol stocks are said to be available. Hoarding is not the only reason for this situation. Hoarders are having a field day because the fuel distribution network is extremely inefficient. If all filling stations are made to remain open round the clock, at least for a few days, with their supplies being replenished regularly, there will be no need for the people to wait for long hours. If man power is a problem, the Civil Defence Force personnel could be deployed to help dispense fuel.

If the people can be convinced that there is a system in place, and they do not have to spend sleepless nights in their vehicles to obtain fuel, they will not riot, and there will be no panic buying. Is it that a section of the government is advancing a hidden agenda by aggravating the fuel problem?

Continue Reading

Trending